Many confuse that mining means it must generate new coins. The word mining, however, is taken from gold mining analogy. Anyhow, it has an entirely different meaning when coming to cryptocurrencies and blockchain.

Mining is the process that can include the responsibilities like verifying and validating transactions and maintaining and securing the blockchain.

Ouroboros

Cardano uses a proof of stake consensus algorithm called Ouroboros, which employs a power-efficient approach to mining.

The miners must stake funds, and such mining nodes are known as stakeholders. All the stakeholders will involve in electing a slot leader. And a slot leader is the only one who can publish a block.

Each slot is 20 seconds, that is, one block is published every 20 seconds. Stakeholders would elect a slot leader for every slot.

In the election, however, not all stakeholders will be eligible to vote – only who have staked enough at the time. And these stakeholders who have voting rights are called electors.

Each slot would be a part of an epoch. Currently, each epoch is 5 days long.

For every epoch, electors will select the slot leaders by voting. By the end of an epoch, the slot leaders for the next epoch will already be chosen beforehand. One stakeholder, however, can become the slot leader for multiple slots in an epoch.

What is the advantage here?
The miner doesn’t have to expend any computational resources – as one would do in proof of work systems like Bitcoin or Ethereum. It saves a lot of energy. In the first place, Ouroboros consensus algorithm was born out of the necessity to save energy.

Byron

Currently, Cardano is in Byron phase – aka Bootstrap era – and it is not decentralized yet. In this phase, all the mining fees are collected into a virtual pool and then burned. Because all the mining activities are performed by IOHK – the institution behind the Cardano development – and its partners only. The public isn’t yet allowed to participate in mining.

Shelley

The next phase after Byron is Shelley – in this phase, Cardano will be decentralized. And the mining will be open to public and voting process will be in place for taking any major decisions.

As the block time is just 20 seconds, sometimes there would be no transactions to be included. Hence there will be no mining fees, and, in turn, no incentive for the miner. This issue will be addressed in the shelly phase. And it is interesting to see how the transaction fees distribution plan would be.

Concluding Thoughts

Cardano is a blockchain platform like Ethereum. However, its architecture is much more different. We must wait and see how promising Shelley phase of Cardano turns out to be.

Stay tuned! We’ll update this page frequently to reflect the changes in the Cardano mining.